Broker Check

Market News & Commentary - From The Desk Of David Loesch 02.22.2023

February 21, 2024


  • Refunding bond issues will come to the Muni market when the FED lowers interest rates. Refundings have not played a significant role in a long while as issuers have waited for a lower interest rate environment to borrow. It's important to take advantage of this market now before we start seeing this pattern later this year or next.
  • States and municipalities sold $49.2 billion in long-term debt in 2024, 34.8% ahead of last year's pace. The market has held up well, given the increase in supply. We have been discussing how attractive Muni Bonds are, which shows the strength in our market compared to the last two years. There is talk about a Muni selloff in March, given that supply is expected to increase. It will be interesting to see this play out; if we do get one, it will be an opportunity for buyers.
  • The Primary Market: Visible supply begins the week at $6.84 billion, well below the 2023 average of $8.9 billion.
  • Two Federal Reserve officials who voted on policy in 2024 indicated an openness to three interest-rate cuts this year should inflation progress continue. Any rate cuts will continue to increase interest in our markets; I believe we will see cuts at the end of this year's second quarter.
  • According to the state's budget adviser, California expects to see its deficit increase by 26% to $73 billion due to new data indicating that tax receipts fell short of earlier projections. The latest fiscal year, 2024-2025, forecasts a $15 billion growth in the deficit compared to previous estimates. The Legislative Analyst's Office (LAO), commonly referred to as the LAO, reported that traditional corporate tax collections decreased by over 33% in December compared to the previous year. Additionally, the LAO noted that California's income tax withholding and estimated payments have been relatively weak recently.
  • Illinois is confronting its inaugural budget deficit in three years as it grapples with escalating expenses across various sectors, including education and services for migrants. Governor J.B. Pritzker, a Democratic billionaire in his second term, is slated to present his proposed spending plan for the fiscal year commencing on July 1 this Wednesday. Following consecutive years of budget surpluses, Pritzker now faces the challenge of identifying measures to address a budget shortfall that is anticipated to expand in the coming years.
  • Wall Street economists anticipate that the surge in productivity following the COVID-19 pandemic will persist, supporting robust economic growth without a corresponding increase in inflation. While Federal Reserve officials find this concept intriguing, they maintain a degree of skepticism. Productivity growth has averaged 3.9% over the last three quarters, a rate more than triple that observed in the decade leading up to the pandemic. Enhanced worker efficiency enables firms to increase wages without necessarily raising prices, making monetary policy less preoccupied with inflation concerns.

 

At The DRL Group, we specialize in helping high-net-worth investors maximize tax-free returns by proactively maintaining their custom bond portfolios through all market conditions.

 

David Loesch

dloesch@drlgroup.net

www.drlgroup.net

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

 

New Edge Securities, Inc. has no affiliation with Bond Desk Trading LLC, Bond Trader Pro, Tradeweb Direct, Bondpoint, TMC, or any other ECN. Yield to call (YTC) does not indicate total return; this yield is valid only if the security is called. Bonds may or may not be called or be callable on multiple dates or, in other cases, called on any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Prices and availability may change at any time without notice. Do not buy discount bonds based on the Yield to Call (YTC). Insured bonds are issued for timely payment of principal and interest only. Insured bonds do not cover potential market loss and are subject to the insurance company's claims-paying ability. Non-rated (NR), Withdrawn (WR), or below investment grade bonds, lower-rated bonds carry a greater potential risk of default & should be considered by sophisticated investors only. Bonds may be subject to capital gains tax. This summary is for informational purposes only and is not an offer or solicitation for the purchase or sale of any security or a recommendation or endorsement of any security or issuer. New Edge Securities, Inc. and  The DRL Group make no representation about the accuracy, completeness, or timeliness of this information. Bonds could also be subject to the DeMinimis Rule; please consult your tax advisor for further clarification.

As with any investment, market value may vary during the period the asset is held. Subject to prior sale and market conditions. This offering is in limited quantity. Please take advantage of them before they are gone.

This report does not regard any particular recipient's specific investment objectives, financial situation, or needs. This report is based on information obtained from sources believed to be reliable, but no independent verification has been made, nor is its accuracy or completeness guaranteed. This report is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Opinions expressed herein are subject to change without notice. The division, group, subsidiary, or affiliate of NewEdge Securities, Inc., is under no obligation to update or keep the information current. The securities described herein may not be eligible for sale in all jurisdictions or to specific categories of investors. NewEdge Securities, Inc. accepts no liability for any loss or damage of any kind arising out of the use of this report. Please contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio. Municipal income may be subject to state and local taxes and the Alternative Minimum Tax. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer. As with any security, there is an inherent market risk possibility to the principal if the security is not held to maturity. Non-rated bonds (NR) should only be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.

Securities are offered through NewEdge Securities, Inc., a registered Broker-Dealer and member of FINRA/SIPC.

The DRL Group is not a registered entity, subsidiary, or control affiliate of NewEdge Securities, Inc. 

Bonds are subject to market and interest rate risk if sold before maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.

Bonds could also be subject to the De Minimis Rule; please consult your tax advisor for further clarification.

Reminder: E-mails sent through the Internet are not secure. Do not use e-mail to send us confidential information such as credit card numbers, change of address, PINs, passwords, or other important information. Do not e-mail orders with time-sensitive instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private; it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this e-mail, nothing in this message should be construed as a digital or electronic signature.

 

Call us today at 281-398-8600 to invest in these or any of our other offerings.